Academic journal article Advances in Management

Performance of Intellectual Capital Management of Indian Public Sector Enterprises - Using GRA and MPI

Academic journal article Advances in Management

Performance of Intellectual Capital Management of Indian Public Sector Enterprises - Using GRA and MPI

Article excerpt

Abstract

Intellectual capital is most vital enabler of enterprises. Managing intellectual capital effectively can greatly enhance the competitive advantages of any enterprises. This study focused on how the enterprises utilize intellectual capital, in order to strengthen the competitiveness of enterprises. This research established a novel assessment model to measure the performance of intellectual capital management. The research target is the Indian Public Sector Enterprises. The research collected data from the Annual Report of PSEs listed in Bombay Stock Exchanges for the period 2001-02 to 2010-11. A total of 50 companies were randomly selected amongst Indian Public Sector Enterprises and were chosen as empirical samples.

The results demonstrated that this novel assessment method really identifies the relative advantages and benchmarking for Indian Public Sector Enterprises. The best company is chosen both in operational performance and productivity improvement. This model is a performance assessment model to judge Intellectual Capital along with Financial Capital.

Keywords: Intellectual Capital, Knowledge Management, Indian Public Sector Enterprises, Data Envelopment Analysis, Grey Relational Analysis, Malmquist Productivity Index.

(ProQuest: ... denotes formulae omitted.)

Introduction

By the end of the Second World War in 1945, most agriculture-based economies in Europe and North America had transformed into manufacturing economies, changing the focus from land and labour to financial and physical capital. Today, world economies are moving from manufacturing toward knowledge-based economic activity. Drucker6 indicates that knowledge is the only meaningful factor of production that is superior to land, labour and capital. He adds that the unique contribution of management in the 20th century was the 50-fold increase in the manual worker's productivity through the conversion of labour-intensive economies into manufacturing economies. In the 21st century, management has contributed to the increase in productivity of the knowledge worker and a shift from production equipment to knowledge work. This is why many firms and even countries are planning strategies to reposition themselves in the emerging knowledge economy.

In the current era of the knowledge economy, business resources comprise 20% tangible assets and 80% that are intangibles. The corporate performance measurement system, however, dates back to the manufacturing era and are heavily inclined toward financial and physical aspects, lacking relevant information on the performance of intellectual capital (IC) or knowledge capital (KC). Thus, different ways of monitoring operations are needed to achieve maximum productivity from companies' intangible resources. There have been many attempts to define the term IC. IC is knowledge that can be converted into value.

Economic managers in many countries feel that the transformation of production-based economies to knowledge-based economies is inevitable if they are to maintain the pace of economic development. IC is a moving force for business success. Seeing the growing importance to prepare for the challenges of the knowledge economy in the globalization era, the Government of India has constituted National Knowledge Commission under the chairmanship of Sam Pitroda. It is expected that the recommendations of the commission will ultimately facilitate far-reaching changes in the field of governance, education and research. To quote the chairman of the commission, "We are planting the seeds that will produce results within 20 years."

In a knowledge economy, IC is considered crucial to the competitiveness of many companies, regardless of which industry they belong to. A sample of 50 companies listed in BSE-PSU are selected keeping in view that most companies with vast intellectual capital management (ICM) experience are large organizations of India having potential to become large scale organizations of the world. …

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